Indian Economy Grows by 7.9 Percent in Third Quarter

The Indian economy performed far better than was predicted in the three month period from July through September, with the Asian country enjoying year-on-year growth in its Gross Domestic Product (GDP) of 7.9 percent.

With both the Financial Times and the Wall Street Journal reporting that market analysts were expecting third quarter growth of 6.3 percent those expectations were confounded as India saw its economy put in its best performance since the first three months of 2008, with the Financial Times noting the particular strength of the country's manufacturing and service sectors.

Furthermore, according to the Wall Street Journal, whilst there has been no official data released by the Indian authorities HSBC, the world's largest bank and one of its largest companies, has estimated that between Quarters Two and Three the country which is the I in BRIC, the acronym used to describe the fast-growing developing economies of Brazil, Russia, India and China, witnessed GDP growing at an annualized rate of 13.9 percent.

Robert Prior-Wandesforde, a senior economist at HSBC, noted:We believe this to be the biggest rise the Indian economy has seen since the quarterly data began in 1996

During Quarter Two the Indian economy had seen year-on-year growth of 6.1 percent and there is now talk of interest rates being raised as the dangers of inflation begin to occupy the minds of policymakers at the Reserve Bank of India. Mr Prior-Wandesforde is one of the analysts who believe that a rate increase could well come before the end of the year, although January appears to be the most likely time for a move on that front by the Reserve Bank.

The manner in which India has recovered from the economic downturn is being attributed in large part to the government's stimulus programs, accompanied by dramatic cuts in interest rates, with Indian Finance Minister Pranab Mukherjee quoted as saying:The GDP numbers indicate response to initiatives taken by government in various policy measures including injecting stimulus, which we did in three doses over the last 11 months

Subir Gokarn, the Deputy Governor of the Reserve Bank of India has acknowledged that thoughts should now be turning as to when and how stimulus measures currently in place should be withdrawn.

One area of concern for India, which has recently attracted criticism for its failure to address the problem of hunger within its population, is the effects of a poor monsoon on its agricultural production. The Financial Times says that, when released, the figures for the current quarter should reflect more accurately how the agricultural sector has fared as a result of lower than anticipated rainfall.

There are fears too that the situation in Dubai, where the government's investment company Dubai World wants to defer payment of debts for six months, may impact negatively on India.

The United Arab Emirates (UAE), Dubai is one of the seven emirates that form the UAE, is an important export market for India and in addition there are many Indians employed in the Persian Gulf, where the UAE can be found, sending back money to families in their homeland.

However Montek Singh Ahluwalia, Deputy Chairman of the Planning Commission in India, has stated that Indian banks have little direct exposure where Dubai is concerned and, referring to workers in the Gulf sending money back to their families, has asserted that people "cannot necessarily conclude that there will be negative impact on remittances".

In 2008 the Indian economy grew by 6.7 percent, having seen growth in excess of nine percent in each of the three preceding years. It now remains to be seen if growth for the fiscal year ending on March 31 2010 will exceed forecasts that were in the 6-7 percent range.